Backup Withholding
Income tax withholding is money withheld from your income and paid to the government to be applied against your annual income tax bill. That's withholding, right?
So then what is backup withholding? Is it extra money withheld in case the other money withheld wasn't enough? Nope. If a taxpayer didn't provide the correct Tax Identification Number, or did not report dividend, interest, or patronage dividend income to the IRS, they may be subject to backup withholding. Things like rents, royalty payments, profits, commissions, fees, and other payment for work as an independent contractor may also trigger backup withholding.
"May be subject to" implies the taxpayer did it once, the IRS noticed it, and they requested a correction so the taxpayer is on double-secret probation.
FYI, a "patronage dividend" is essentially a refund issued to those who purchase goods or services from a cooperative. Example: Farmer's Co-op's are big in the midwest.
Related or Semi-related Video
Finance: What is the IRS?19 Views
Finance allah shmoop What is the i r s Well
i rest might be the three most hated letters in
the alphabet Well after d m v a pms and
well maybe std The i r s is the internal
revenue service Their internal i e inside the government they're
in charge of collecting revenue A k a They take
money from your pocket in the form of taxes and
they deliver it to uncle sam and they you know
service you and it doesn't feel good So yeah these
are the guys from the us treasury department who checked
to make sure you filled out your income tax forms
correctly and submitted the proper amount And if you screwed
up in any way they will let you know about
it and a half in the form of angry letters
Phone calls knocks on your front door rocks through your
back window Whatever it takes to get you to pay
your fair share of taxes Like why should you get
away with not paying when the jones has paid all
they owed Or the irs can do even worse and
audit you with an audit he irs will request extensive
and very specific information and records from you Paycheck deductions
all kinds of things You claim that you did that
were deductible that may or may not have been forcing
you to spend hours upon hours at your public storage
unit digging through boxes you hoped and prayed you'd never
see again Well after the third solid week of having
your financial history poked and prodded like you've had to
turn your head and cough you uh might actually be
ready and willing to trade in those three letters of 00:01:35.13 --> [endTime] irs for rough one of those stds instead
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